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Regional Equity Strategy Q4 2007
Stock Profile: CDL Hospitality Trusts
BUY S$2.35 STI : 3,476.31
Price Target : 12-Month S$ 2.90
Potential Catalyst: Strong domestic and regional play
ANALYST
Singapore Research Team
research@dbsvickers.com
FORECASTS AND VALUATION
FY Dec (S$ m) 2006A 2007F 2008F 2009F
Gross Revenue 28.2 98.0 120.4 138.3
Net Property Inc 25.9 90.0 110.6 127.0
Total Return 155.8 63.1 100.3 114.1
Distribution Inc 20.2 69.5 107.5 122.0
EPU (S cts) 3.3 8.2 12.0 13.4
EPU Gth (%) N/A 151 45 12
DPU (S cts) 2.9 9.1 12.8 14.4
DPU Gth (%) N/A 214 41 12
NAV per shr (S cts) 102.9 133.5 130.5 128.2
PE (X) 71.7 28.5 19.6 17.5
Distribution Yield (%) 1.2 3.9 5.5 6.1
P/NAV (x) N/A 1.8 1.8 1.8
Aggregate Leverage 34.6 26.1 26.1 26.2
ROAE (%) 3.2 6.9 9.1 10.4
SHARE PRICE CHART
2.80
2.30
1.80
1.30
S$
0.80
Sep-06 N ov-06 Feb-07 A pr-07 Jul-07 Sep-07
CD L H o sp ita lity T ru sts 100-D ay M A
AT A GLANCE
Issued Capital (m shrs) 823
Mkt. Cap (S$m/US$m) 1,933 / 1,275
Major Shareholders
Hospitality Hldg (%) 38.2
Istithmar Hotels FZE (%) 8.2
Siong Lim (%) 8.1
Free Float (%) 45.5
Avg. Daily Vol.(‘000) 1,751
Earnings Rev (%): 2007: - 2008: -
Consensus EPS (S cts): 2007: 7.2 2008: 9.0
Variance vs Cons (%): 2007: 13.9 2008: 33.3
Sector : REITS
Bloomberg/Reuters Code: CDREIT SP/CDLT.SI
Principal Business: CDL REIT is a stapled security consisting of
hospitality trust with initial portfolio of four hotel assets in
Singapore and a business trust
CDL Hospitality Trusts
Singapore hotel proxy with regional aspirations
Story: CDLHT, one of the largest hotel owners in Singapore
in terms of rooms, has been benefiting from the rising RevPAR.
Point: Their Singapore portfolio continues to do well with
increase in tourism, MICE and business travels. Singapore,
being promoted as a destination for mega conferences, business
meetings as well as new major sporting events like Formula One
racing, is expected to provide strong demand for hotel rooms.
CDLHT is also looking into further expanding its portfolio both
domestically and internationally and taking steps to become one
of the key regional hotel REITs in this region.
Relevance: We expect continued strong growth in
occupancy and RevPAR due to the positive outlook for the
Singapore tourism and business travel sectors. CDLHT has plans
to further expand the portfolio and acquire more yield accretive
properties. We maintain our Buy recommendation on CDLHT
with a TP of S$2.90, backed by DCF calculation.
MICE, corporate visitors are key growth drivers. MICE and
business travelers are on the rise due to the increase in business
activities. This has led to a gradual increase in percentage contribution
from high-yielding corporate clients to relatively lower-yielding leisure
clients. Over 70% of the business now is from corporate clients. We
expect this will continue to put increased emphasis on the corporate
side as they will provide a sustainable, regular flow of business with less
fluctuations compared to leisure travelers. In tandem with the increase
in MICE and business travel, CDLHT should continue its trend of strong
performance
The new Singapore F-1 Race, integrated resorts to add further
demand. The demand for rooms will be even greater in 2008 and
beyond particularly in the last few weeks of 3Q and first week of Q4
when Singapore hosts the Formula 1 Race slated for end September
2008 onwards. There should be a sharp increase in demand due to the
increase in tourists and racing-related staff. Two more attractions,
Marina Bay Sands and Resort World at Sentosa which they are
targeting to be open by 2009-2010, will further increase the demand
for hotel rooms in prime areas.
Poised to be a key regional hotel REIT player. With five Singapore
hotels and one New Zealand hotel under its portfolio, CDLHT is poised
to acquire more hotels in the region such as the high-growth countries
including China, India, Vietnam, and the United Arab Emirates. It’s goal
is to achieve a balanced portfolio with 60% in Singapore properties
and 40% in overseas properties.
Maintain Buy, TP S$2.90. With strong demand for hotel rooms as
well as continued growth in the MICE, business and tourism travels, we
strongly believe that CDLHT will benefit from the uptrend in RevPAR for
their Singapore properties. We reiterate the Buy recommendation for
the stock with TP of S$2.90, backed by our DCF calculations.
Refer to important disclosures at the end of this report
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